EGA IPO on the cards for 2018 as net profit surges 59%

Higher production, metal prices buoyed profitability at the aluminium producer

EGA, earlier in the week received its first shipment of bauxite from Guinea. Courtesy Mubadala
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Emirates Global Aluminium, one of the world’s biggest aluminium producers that posted a 59 per cent increase in 2017 net profit, expects to sell shares to the public in an initial public offering this year, its chairman and chief executive said on Tuesday.

Abu Dhabi's Mubadala Investment Company, which has $127 billion in assets and is part owner of EGA, plans to take the company public through a share float, said Khaldoon Al Mubarak, chief executive of Mubadala and EGA’s chairman.

“2018 is the year we intend to take EGA to the market. It’s a company which is well positioned and we have de-risked the many capital investments required,” said Mr Al Mubarak. “It’s an industrial champion, the largest exporter in the UAE outside oil and gas sector. It is one of the largest employers and it is the biggest partnership between the government and Abu Dhabi and Dubai."

Abdulla Kalban, EGA’s chief executive, confirmed the IPO is on track, subject to market conditions, but declined to disclose the size of the stake to be sold or the listing venue.

EGA’s IPO comes at a time when the company is expanding its operations in the UAE and abroad, with projects aimed at securing all segments of the value chain, from a $1.4bn bauxite mine in Guinea to setting up a $3.3bn alumina refinery in Abu Dhabi, both of which will come on stream in 2019.

Alumina, which is the feedstock for aluminium smelters, is sourced from bauxite. EGA currently imports all the alumina it uses in aluminium production, but last year it signed a three-year alumina supply agreement with Vietnamese miner Vinacomin. The state-owned Asian miner will supply to its two smelters in Dubai and Abu Dhabi.

"We see that the acceleration of GDP growth, the improvement of sentiment across the region and the rebound in oil prices should improve the appetite for new listings in general," said Rami Sidani, the head of frontier investments at the asset manager Schroders.

"We feel that the governments, both in Dubai and Abu Dhabi, continue to have crown jewels that are strong candidates to come to the markets."

Read more:
Mubadala to float Emirates Global Aluminium next year, CEO says

Public offerings are making a comeback in the Middle East following a dry spell over the past couple of years when a slow down in economic growth forced many companies to shelve plans for IPOs amid concerns of not getting proper valuations for their businesses.

The Middle East and North Africa region recorded five IPOs in the third quarter of 2017, up from a single listing in the same period a year before, consultancy EY said in a report released in December. The value of IPOs in the third quarter rose 20 per cent to $236.7m from the year-earlier period, led by three deals on Tadawul. More offerings are expected, thanks to the recovery in oil prices.

EGA, which posted a 10 per cent net profit growth in 2016, said 2017 profit soared to Dh3.3 billion on a 20 per cent increase in revenue which reached Dh20.5bn, thanks to record production, higher prices of aluminium and cost control.

The company, which achieved a record cast metal production of 2.6 million tonnes last year compared to 2.5 million tonnes in 2016, will maintain the same level this year, Mr Kalban said.

The alumina refinery, which has been fully funded, will have a capacity to produce 2 million tonnes of smelter-grade alumina per year once fully operational, meeting 40 per cent of EGA’s alumina needs. The Guinea project, which the company seeks to raise funding for from banks, will produce 12 million tonnes of bauxite per year, with around a million tonnes going to the alumina refinery and the rest exported to markets, including China and India.

EGA does not have any immediate plans to issue a bond, said Danny Dweik, the chief financial officer.

The company currently exports 90 per cent of its aluminium and its biggest market is Asia, followed by Europe.

EGA also exports to the United States, where President Donald Trump is proposing the imposition of tariffs on steel and aluminium product imports.

“We will not speculate on the decision made by President Trump but we are obviously on our side prepared to deal with whatever the decision is,” said Mr Dweik.

EGA was created in 2013 through a merger between Abu Dhabi’s Emal and Dubai’s Dubal. It is jointly owned by Mubadala and the Investment Corporation of Dubai, the emirate’s sovereign wealth fund.